SINGAPORE, Feb 13 - Oil prices held steady on Friday as the market absorbed the implications of OPEC's pledge this week to cut production. The benchmark March price <0#CL:> of U.S. light crude futures was last trading at $34.09 a barrel, up 11 cents. London's Brent crude was five cents higher at $230.02 a barrel. The West's energy watchdog, the International Energy Agency (IEA) warned that OPEC's tight control on output could prevent low world oil stocks from rising. The Organisation of the Petroleum Exporting Countries, which controls half the world's oil export trade, pledged on Tuesday to cut its official supply limits by one million barrels per day to 23.5 million bpd from April 1. It also said it would act immediately to cut about 1.5 million bpd in output by its members above self-imposed limits.
But OPEC's biggest producer Saudi Arabia has already told customers in Europe and Asia that it will not be cutting March supplies from February, raising doubts about how quickly the over production will be reined in. Consumers, who in 2003 paid the highest annual average prices in more than two decades, fear high oil prices will hold back their economies, critical for countries like China, the world's fastest growing major economy. Already the world's sixth-biggest economy, China imported a record 1.9 million bpd in 2003, but the Chinese International Business Daily newspaper reported on Friday import growth had leapt to 2.5 million bpd in January.
LITTLE COMFORT FOR BUYERS
Several OPEC ministers, including Saudi Arabia's Ali al-Naimi, have tried to ease consumer disquiet over OPEC policy by saying it could always be reversed if oil prices stay high. Nigerian oil adviser Edmund Daukoru added his voice on Thursday, saying the planned April 1 cut could always be cancelled if oil prices are at the top end of OPEC's reference price range of $22 to $28 a barrel. "If the price is between $27 and $29 by the March meeting we may not activate the cuts," he told a small group of reporters in Algiers. "If we have to cut we will cut but if we don't have to cut, to me that is the best." OPEC's reference oil price was last assessed at $29.13.
OPEC's comments offered little comfort for oil buyers, said Claude Mandil, the head of the IEA. "It's like beating someone with a big stick and saying I'll stop if it hurts you," he told Reuters. "We are afraid that the oil will fail to come exactly at the time when the driving season begins and demand increases," he said. There was also little chance U.S. light crude prices would drop significantly, said Leo Drollas, deputy executive director at the U.K.-based Centre for Global Energy Studies. "It won't be at such a high level as $34 in the second quarter. They won't be coming down much below $30 a barrel," he said, adding such high prices limit world economic growth. "It's obvious it's hurting the economy in the sense that the world economy would recover faster without the cut," he said on the sidelines of a Singapore power conference.//